Crude Oil($USO)continues its steep slide from its October peak. One month ago $USO reached new 2018 highs as it extended its rally since the 2017 close to 35%. Since then crude has struggled mightily. This week has been particularly painful. Yesterday the $USO closed well below its 200 day moving average, its first close below this key long term indicator in over a year. Today the index is working on its 5th straight loss as it stretches the pullback from the highs to 17%.
The $USO is testing a major support zone as the week comes to an end. The area between $13.00 and $13.50 marks a series of important highs and lows. In the 1st quarter of this year the $13.30 area provided heavy resistance. Once this level was cleared in early April it has served as a floor. In June it began to give way but ultimately provided the footing for a powerful breakout on June 22nd. After a dip in early August another monthly low was put in place near this key zone.
A clear break below $13.00 would be very damaging. Until then the $USO, while entering oversold territory, should be considered a fairly low risk buy.
At time of publication we do not have a position in $USO.